Housing Bubble Bursting and selling a house

Iristxo

Apologies for raising a personal issue here if you allow me. Take is as a compliment as I value your opinions.

So a few months back I posted as I was thinking of selling a nice 3-bed semi in SDC. We intend to trade-up some time in the future (we will outgrow the house soon) of course no trading up until things have stabilized, which will take a few years I reckon. However, I am thinking of selling now, cashing the (small) profit and basically "storing it away" until it can get safely re-invested in a more suitable house for us in the future. For the record I reckon my house has lost a good 60k if not more in the last year (I mean, from what it would have achieved at the peak of the buble).

Of course it's a lot of hassle, renting for a few years and stuff like that, and of couse we are also taking a risk, I admit that: prices could not go down any more (highly unlikely in my opinion) or even go up inmediately (nearly impossible?). But I reckon it is worth the (small) risk as any equity that we may manage to bag would help us buy a better house at a later stage. And it's not like we're selling purely to bag the profit. We would have sold anyway in 2-3 years or so.

I know there is more appropiate forums for questions like this, but if any of you are bothered, would you tell me what you think?

Thanks either way

Victor

Split from http://boards.ie/vbulletin/showthread.php?t=2055033806&page=193

Iristxo, you deserve a decent answer and I doubt you will get it on that thread.

You need to approach this very carefully - for one thing, you will lose your mortgage interest relief if you rent - the tax relief for renting is only worth about €300 per year.

tibor

Victor wrote: »

Split from http://boards.ie/vbulletin/showthread.php?t=2055033806&page=193

Iristxo, you deserve a decent answer and I doubt you will get it on that thread.

?

Glenbhoy

Victor wrote: »

Split from http://boards.ie/vbulletin/showthread.php?t=2055033806&page=193

Iristxo, you deserve a decent answer and I doubt you will get it on that thread.

You need to approach this very carefully - for one thing, you will lose your mortgage interest relief if you rent - the tax relief for renting is only worth about €300 per year.

I think that the bigger problem is that nothing is selling at the moment, the mortgage interest relief is irrelevant as it kicks back in again when you purchase again, and you don't lose out in any way by taking a break from owning for a while.

Borzoi

Glenbhoy wrote: »

I think that the bigger problem is that nothing is selling at the moment, the mortgage interest relief is irrelevant as it kicks back in again when you purchase again, and you don't lose out in any way by taking a break from owning for a while.

Just to bear in mind - as you are behind the curve in selling, so you'll be behind the curve in any recovery. That is you've already lost some on the house, chancesare you'll wait for a recovery, but the sure sign of that is when prices have already started to rise, so once again you'll be behind the curve

Secondly there are costs associated with selling, and then buying - combined it's could be around 10% - that stamp duty is a killer:mad:

mastermind2005

Iristxo wrote: »

I admit that: prices could not go down any more (highly unlikely in my opinion)

Why do you say that?

Smoggy

Iristxo, you have to go through the maths and make a guess at how far you think house prices will fall. Say so far your house price has dropped by 5%, the chances are that you will have to drop another 5-10% to make a sale.

Now take into account the cost of selling / buying, proffesional fee's, stamp duty etc and then the cost of renting for a few years.

If the market is to have a 15/20% correction, then you will most likely find yourself out of pocket, but if the drop is furthur then your in the money. My guess is that you have left it to late, but who knows how far the market can fall.

kluivert

I bought a three bed semi in a South Monaghan town, vendor was looking 265k and sold it for 228k, as he was trading up to a four bed semi in the same town.

You will sell your house at the RIGHT price.

There are still alot of people out there waiting, its like fishing, for the price to hit a certain mark.

I have to be honest, we put a bid on a 3 bed semi house of 265k where the vendor was looking for 290, house sold at 280k, we didnt increase our offer on this house, again in Monaghan. Vendor was buying a house.

conor_mc

Smoggy wrote: »

Now take into account the cost of selling / buying, proffesional fee's, stamp duty etc and then the cost of renting for a few years.

I think he's saying they intend to trade up anyway, so the associated costs will be borne one way or the other. Possibly higher legal fee's because of two seperate transactions, but that may be offset by lower stamp duty if prices have fallen.

The only question really is what way for house prices. As it happens, we were in a similar situation but sold up in May this year. We've been renting since June, and so far we're doing well. Rent is less than the interest we'd be paying anyway (interest is rent on money, don't let anyone tell you different!), so the difference is whether you stash away €x00 in a bank account or use it to buy a tiny bit of your house every month, only for that value to disappear just as quickly, and then some.

On top of that, your profit will be banked somewhere earning interest.

When you come back to buy, make sure you shorten the mortgage term appropriately. If you sell today and need a 30-yr mortgage to buy, then if you hold off 3 years you should only be taking on a 27-yr mortgage then. Otherwise, you're eroding the "value" (for want of a better phrase) you've stored up by renting.

Do-more

I wanted to sell for similar reasons in Sept. '06 but Mrs. Do-More was expecting at the time and wouldn't entertain the notion. By the time she had come round to it, late spring, the market was pretty dead. It was only when a similar house close to us sold in June for a good price that we decided to take a punt and put the house on the market.

The asking price was about 10% lower than what it would have been a year earlier and the price that we would have accepted to make all the hassle worthwhile was about 5% below the asking.

We had a number of viewings in July and August but no offers. By September the viewings dried up and so we took the house off the market in early October. This actually had a positive effect as I guess it called the bluff of some people who were probably expecting us to drop the asking price. We then got an offer a little below what we would accept but it could probably be bargained up. In any case the offer was subject to the sale of their own house and as they haven't been able to sell, nothing more has come of it.

In our case we want to build our own house so we would have to rent for at least one to two years anyway and we budgeted for buying a site as soon as possible rather than waiting in the hope of large price drops.

In our case it seems that we have missed the boat, the market here in the Midlands is almost completely dead. Our EA has let go 4 of his 7 staff.

If you don't sell now, do bear in mind that even if prices drop substaintially the price difference between your house and your desired larger house will almost certainly reduce.

Also bear in mind the hassle it is in keeping your home in "show condition" so that you are ready for viewings at short notice.;)

Look around you, if you are prepared to accept 5%-10% less than the lowest asking price of comparable houses in your area then go for it. If not then bide your time.

Nov2006

Iristxo, it all depends how you think the property market will fair out. If you believe that prices wont fall any further then there is no point in selling now and having the incovenience of moving to rented accom. I personally believe that the market will fall again, would expect at least a further 12% especially with the backlog of houses there is at the minute and once Spring comes people traditionally think of selling up again , so something has to give!
We sold in May and are now happily living in a rented house we could never afford to buy yet it is the same amount we were paying on a mortgage. Plus the equity that we banked is earning a nice amount of interest each month. So we are in a great position.....if I were you I would do it! Just depends if you can sell your house at the minute! The bottom of the market has yet to be hit, so it might be worth a shot!

domania

Nov2006 wrote: »

We sold in May and are now happily living in a rented house we could never afford to buy yet it is the same amount we were paying on a mortgage. QUOTE]


WE have done the same. Sold about 18 months ago. Sitting it out now until next year. Sold at a great time. We are already up on the market as the prices have dropped.

antoinolachtnai

I would be really careful about trying to game the market, particularly at this stage. The transaction costs are big, and the moving and disruption of going between rental accommodation are big too, especially if you have children. There is an emotional cost as well as a financial cost. There are practical reasons to continue owning your own home, even if the financial factors weigh against you.

In terms of tax reliefs, it is nearly always better to avail of any reliefs that are available sooner rather than later if possible.

Of course it all depends on what price you can get for your house, and what properties will cost in a couple of years.

Also, remember that the house you trade to in a few years will also be subject to a drop if the market does indeed go down and stay down. If you are only going to bag a small profit, think whether there will really be a benefit for you at the end, even if things do work out as you expect.

There is also the possibility that the market will go down but 'bounce' at the time when you want to buy in again.

Do-more

antoinolachtnai wrote: »

There is also the possibility that the market will go down but 'bounce' at the time when you want to buy in again.

Well worth taking note of this post, there may well be many "false bottoms" in the market before we see the true bottom.

(Of course we won't suffer those kinds of falls, Ireland is a "special case"! :rolleyes:)

Glenbhoy

antoinolachtnai wrote: »

In terms of tax reliefs, it is nearly always better to avail of any reliefs that are available sooner rather than later if possible

In this case it may not be, the reasons are twofold, firstly, income tax rates are set to increase, thus if the standard rate rises from 20% to 22%, there'll be extra relief, secondly, it's likely that stamp duty will be reformed, probably not in this budget, but pressure will really be ramped up if the slump continues to the next budget.

(Of course, mortgage interest relief could be phased away before one gets a chance to use it, in addition, the market could spark back into life etc....)

MrVostro

Glenbhoy wrote: »

In this case it may not be, the reasons are twofold, firstly, income tax rates are set to increase, thus if the standard rate rises from 20% to 22%, there'll be extra relief, secondly, it's likely that stamp duty will be reformed, probably not in this budget, but pressure will really be ramped up if the slump continues to the next budget.

(Of course, mortgage interest relief could be phased away before one gets a chance to use it, in addition, the market could spark back into life etc....)

Wow.... can i borrow that crystal ball for a while.

luckat

Depends where you are in the market, in my inexpert opinion. If you're at the bottom of the market, you'll do reasonably well, because the fact that first-timers don't have to pay stamp duty will cushion your price.

But if you're in the middle of the market it's more profitable to stay where you are, because stamp duty and the other expenses of moving - doing up the house, buying new appliances for the new house and probably repainting it and so on - are going to make a move too expensive.

The Government could release a lot of middle-sized houses by a move on stamp duty that would allow empty-nesters to sell and move to a different kind of house or apartment, releasing three- and four-bed semis for families.

The_Conductor

I'm not sure I'd agree Lucille- the bigger problem, bigger than stamp duty that is, is the fact that building regulations were relaxed so much- allowing a couple of hundred thousand tiny apartments to be built without any thought given to provision of local services, or the future of those who would be purchasing the units.

The only 3-4 bedroom houses built recently are far outside of Dublin, either as one-off units or as part of estates that necessitate silly commutes (the lucky ones may be on rail lines- but this leads new builds in Athlone and Wexford being described as within commuting distance to Dublin).

Most of the people in older houses, far from wanting to trade down, value thier space and privacy, along with their neighbourhoods and friends who are all part of their daily support structures, where they are at the moment. Annecdotal evidence is that they prefer equity release packages from the banks and other institutions, than they do moving.

There is thus a scarcity factor associated with 3-4 bedroom houses (in good neighbourhoods). Far from releasing them for those apartment dwellers who want to trade up- a reform of stamp duty is more likely to underpin their prices as sellers and buyers both recognise and value their scarcity factor.

One of the largest developments of 3-4 bedroom homes in the Dublin region in recent years (Adamstown) where developers actually tried to get their act together properly is in trouble on a few levels. The "Educate Together" multidenominational school is broke and may close early in the new year. The railway station, while open, lacks the capacity to deal with local demand- meaning there are thousands of additional cars on the road at peaktime further saturating the N7 and N4. Buy-to-let investors have let out large numbers of units to the HSE resulting in ghetto-isation of immigrant communities. Parts of the development are unsaleable due to a planned traveller halting site. Its a mess.

I don't think that reform of stamp duty is necessarily the issue at all. Historic house prices in OECD countries (as opposed to apartment prices) have been around 4 times the average industrial wage- i.e. about 130k in todays terms in Ireland. If prices fell towards these levels- the stamp duty issue simply wouldn't be a problem any longer, nor would the 40 year 100% mortgage club exist. I personally believe we need the Government to keep its paws out of meddling in the property market and allow it return to norms, as determined by whatever the fundamentals are. We had the chance to make everyone's lives a lot better when we commissioned the Bacon report and other housing initiatives. However vested interests were more valued that Joe and Jane Public- which has left us where we are today.

If the government really cared about people- I think that it should ignore the building industry altogether and instead focus on measures to minimise people's daily commutes, improve public transport and reduce conditions which encourage tax avoidance or evasion.

Its a mess.......